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Twitter's wings clipped by weak user growth

NEW YORK --Twitter shares took a nosedive Thursday after the company's first earnings report shook up investors expecting strong growth at the messaging platform.

The shares closed down 24 percent at US$50.03 a day after Twitter reported a US$511 million quarterly loss and only sluggish growth in the number of users.

The figures “show signs of slowing user growth and engagement ... suggesting that Twitter may be finding it more difficult to capture a more mainstream audience,” said Morgan Stanley analyst Scott Devitt in a research note.

Stifel analyst Jordan Rohan downgraded Twitter, noting that “user growth metrics faltered.”

“The company did a poor job explaining how and why the lower user growth was a temporary phenomenon,” Rohan added.

A 'show-me story'

A similar warning came from Cantor Fitzgerald, where analyst Youssef Squali and colleagues said that “Twitter has all of a sudden become a show-me story in the same way Facebook was challenged to prove its mobile credentials over a year ago.”

“We now know how Facebook turned out, but we won't know how Twitter will fare for at least several quarters,” Squali said in a research note.

The first earnings report since Twitter's vaunted public offering in November offered a cold dose of reality for the company.

The results showed revenues in the quarter that ended Dec. 31 doubled from a year ago to a better-than-expected US$242.6 million.

But the number of worldwide users was up just nine million from the figure of 232 million when Twitter went public in November, suggesting only modest growth at a time when investors were looking for a surge.

Twitter said the loss for the year widened to US$645 million from US$79 million in 2012, even as revenues more than doubled to US$664 million for the full year.

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A sign is posted on the exterior of Twitter headquarters in San Francisco on Wednesday, Feb. 5. Twitter shares took a nosedive Thursday after the company's first earnings report shook up investors expecting strong growth at the messaging platform.

(AFP)

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